It’s silly to deprive UK consumers of cheap Chinese solar panels
There is little sense in using tariffs to ‘de-risk’ a trade if Beijing is dumping stuff we don’t even make
Cheap as chips and almost as plentiful as cell phones. The glut of solar panels piling up at ports and in warehouses is such that farmers in Germany and the Netherlands are reported to be using them for fencing.
We may be struggling to meet net zero ambitions for offshore wind but there should, surely, be no such problem with solar, where the price of the panels has halved in the past year and there’s so much supply we seem to have run out of places to put them.
All good, then. Except in one regard: overwhelmingly, the panels come from China. Either that or the South-east Asian offshoots of Chinese producers.
We talk blithely about the need to “de-risk” the economy from an any over reliance on Chinese supply chains and yet here we are with accelerated plans to increase solar capacity five-fold to 70 gigawatts (GW) by 2035, or even sooner if the Labour Party gets its way. This cannot realistically be done without Chinese suppliers.
It’s even worse on the Continent, where the EU plans to install 320GW of new solar capacity by the end of 2025, and almost 600GW by 2030, with around 9bn cubic metres of natural gas consumption displaced by 2027.
Today’s solar technology originated largely in the United States and Germany but, as with much else, they quickly lost the plot. Today, Chinabased producers have a choke hold on supply, with around 90pc of the global market. Meanwhile, European and US manufacturers are struggling to maintain even their current marginal position.
No surprise, then, that the EU should be looking closely at following the US into imposing swingeing import tariffs and anti-dumping penalties on Beijing.
The UK Government, on the other hand, imposes no such tariff. However, although there appear to be no current plans to do so, Clare Coutinho, the Energy Secretary, has expressed concern that too rapid an energy transition would make the UK unduly reliant on China and some Tory MPs in the China Research Group have expressed similar concerns.
I have to admit to being genuinely torn. Allegations of dumping are quite plainly true. As in many other fields, China has spawned an industry that is far bigger than it needs to satisfy its own domestic demands. The surplus is cynically dumped on international markets at knockdown prices.
At the beginning of this year, China had 1,000GW of solar module production capacity a year, either up and running or in development, according to the Australian based think tank, Climate Energy Finance.
Such is the excess that Chinese producers have had to slam on the brakes, with Longi, one of the biggest, planning to slash its 80,000 workforce by nearly a third this year.
China deliberately set out to take advantage of credulous Western net zero targets by massively supporting its own solar panel producers and, as with so many other industries, it has succeeded. We can only guess at the costs of securing such dominance.
There are also questions around alleged use of slave labour from persecuted Uyghur communities.
Call it clever industrial strategy if you like, but China has been extraordinarily effective in undermining any number of key manufacturing industries in the West. Solar is just one example of it.
In so doing, its planners have unbalanced or otherwise destabilised both their own and many Western economies. The Chinese economy has become too dependent on unsustainable levels of overinvestment, while many Western economies – particularly the US and the UK – have become equally dependent on unsustainable levels of consumption. This great faultline in the global economy remains as unresolved today as ever.
On both security and economic grounds, there would therefore seem to be ample grounds for worrying about China’s dominance in production of solar panels.
If there is to be an economic dividend from the green energy transition, should we not in any case be manufacturing more of the technology that underpins it ourselves?
That’s certainly the way the White House looks at it. But when you don’t manufacture any solar panels at all, and never have done, and yet your legally binding net zero target requires you to plaster the landscape with them, then they have to be imported from somewhere, and if the Chinese are stupid enough to sell at an uneconomic price, that’s their loss and our gain.
Much the same point might be made about Chinese EVs. If you are going to force consumers down the path of net zero, then it is incumbent on politicians to ensure the best possible value for money.
Once they’ve got us by the short and curlies, it might be argued, they could hugely increase the price, not to mention threaten to interfere with some of our critical infrastructure in the event of a complete breakdown in relations.
Yet we think nothing of the hundreds of thousands of Chinese made smartphones we buy each year. Why should solar panels be any different? Once installed, solar panels are likely to be a sight less open to hostile manipulation than smartphones, which could easily be designed to incorporate sleeping malware.
To go green while at one and the same time significantly increasing the costs of doing so by imposing a whacking great tariff on the Chinese, or alternatively buying all our kit much more expensively from Germany and America, makes no sense at all. It may possibly be of some benefit to the sadly depleted remnants of Europe’s solar panel manufacturing sector to have a high tariff wall, but since we don’t actually make any ourselves, there’s little if any upside in it for us.
If policymakers worry about haemorrhaging the economic benefits of the green transition, it would be better to focus their attention on other parts of the supply chain – batteries, inverters, mounting frames, cables, installation, maintenance, and other components of solar energy where local supply is capable of adding value.
China has created a major long term headache for itself by attempting to monopolise an industry where painful downsizing will eventually become inevitable once the world has largely transitioned to clean energy.
The economic and geopolitical benefits in the meantime of creating such a stranglehold are equally questionable.
Ultimately, it is always the creditor who pays the price for any consequent trade imbalance. The debtor invariably finds some way of defaulting.
If the Chinese are willing to essentially give away the fruits of their labour, who are we to stand in their way?
To those who ask why we should be setting ourselves such exacting net zero targets in the first place, I say only this: the ship has sailed. For the first time last year, more money was invested in solar energy globally than the entire oil industry. The wind of change now blows too powerfully to reverse it.
‘China has successfully undermined some key industries in the West – solar is just one example of it’